Shein Gets Unboxed
Reading Time: 6 minutesThe Dark Truth Behind $5 Shirts, The fast-fashion giant wants to go public. There’s a lot of controversy to unwrap., Shein IPO: What to know as the fast-fashion giant prepares to go public.
If you’re a woman of a certain age—let’s say under 30—you’re probably familiar with Shein hauls: Usually, videos featuring a young woman unboxing package after package of $5 shirts and $10 bikinis, emphasizing how inexpensive it all is. These videos are not an accident, nor a byproduct of random consumer enthusiasm—they’re a core part of Shein’s strategy to reach shoppers and say, ‘Buy this thing right now.’
Shein, a fast-fashion giant founded in China, has turned retail on its head, especially for a demographic that wants things cheap and wants them now. And it has lofty goals: The company has reportedly filed, confidentially, for an initial public offering.
On a recent episode of What Next: TBD, I spoke with the New York Times’ Jordyn Holman about how Shein is preparing to go public—and the world of scrutiny that will accompany it. Our conversation has been edited and condensed for clarity.
Lizzie O’Leary: In so many ways, Shein is a tech company. Can you tell me a little bit about how it does what it does?
Jordyn Holman: Shein is very tuned in to what shoppers want and what they’re looking for. The way that ‘normal’ retailers work is that they make a whole bunch of one item—say, 10,000 of a certain dress—and then that’s going to be the dress for the season. The way Shein does it is that they make apparel in small batches—so, say, 200 of one item, but they know that 200 customers will probably want that exact item and the sell-through rate will be high. If they see that the dress is selling, then they can put more clothes in production, but they just don’t have those items languishing around, which is really expensive for any retailer. A.I. is a big part of their strategy; it’s really responding and seeing what people are searching.
Shein’s roots trace back to a small online shop that was started in China in 2008, but Shein as we know it today was officially founded in 2012. How did the company begin to take over the U.S. market, and how much market share does it have now?
It took off with college students, with people who wanted things at low prices, but who were also looking for fashion that was accessible. The competitors were PrettyLittleThing and Fashion Nova, the kind of fast-fashion that was online-only. Then, the pandemic. People were shopping a lot during the pandemic, and Shein began to reach other circles. It wasn’t just the 20-somethings; it was moms being like, ‘Oh, this is an inexpensive thing.’
Piper Sandler does a survey twice a year showing the most popular brands among teens. It’s interesting to see over the years how Shein has ticked up. A few years ago, they weren’t on that list, but now they’re up there with Nike. But Shein is still a private company and very closely held, so it’s difficult to gauge how big of a market share they have.
They are inching toward being a public company—there have been rumors that Shein was possibly heading toward an IPO for a while, but your reporting shows it’s happening. Why now?
2023 has not been a good year for IPOs. After the flurry of companies going public over the past few years, this has been a really quiet one. Investors have been expecting Shein to go public and start trading, and it’s hard to say what the company’s thinking on this is; they haven’t commented on the reporting about filing an IPO. But we can look at some of the things they’ve done this past year: The company, which has been historically tight-lipped, has started to be more vocal on sustainability pledges. They’ve been more vocal on a program that they have for independent designers, after facing years of criticism of copying designers. And they’ve been more public about the influencers they work with, trying to show supply chain. All of those things are things they need to answer for if they do start trading publicly here in the U.S.
Is there any way to know how much money this company is worth?
At one point, the company was said to be worth $100 billion. Most recently, that number sits at $66 billion. For context, last year, Macy’s brought in $25 billion in revenue.
Shein has gone through a lot of controversies. When you’re going to go public, all those things come up—investors want to know about them; reporters like you and me want to know about them. Let’s talk about the concern that Shein might be using forced labor.
This is a huge one, because it’s a concern about human rights abuses. To step back, the U.S. currently has a ban on cotton that comes from a specific region in China, Xinjiang, where the U.S. says there is forced labor being used against the Uyghur people. In the U.S., the rule is that no companies can be using cotton from that region. There’s a report from Bloomberg that came out last year that tested some of the cotton used in Shein products and points to that cotton actually coming from Xinjiang, which would be a violation of the law.
Shein has said that it does not use cotton from that region and that it is compliant with the law and does not use forced labor. But that reporting is the basis of much criticism that Shein is facing from lawmakers right now and raises a lot of questions as it continues to do business here in the U.S.
There are also concerns about Customs duties. Can you break that down for us?
That’s the de minimis trade rule. In the U.S., if you are importing goods under $800, you do not have to pay fees to Customs. This is a century-old rule; basically, it’s not worth Customs’ time. But if you’re a traditional retailer, you’re often paying, because you’re bringing in your goods from overseas in bulk, and that’s going to cost more than $800.
Shein’s business model is that they ship directly to customers and they sell items at very low prices. Often, a lot of those packages are going to be under $800. Thus, they are not required to pay this fee. Critics say that’s not fair, that was not the intention of this rule. They say the intention was more like, if your grandmother went to France and is sending you something; it shouldn’t be for large corporations basing their whole business model on it.
One of the biggest criticisms of fast fashion is how harmful it is to the environment and how unsustainable it is as a practice. What does the evidence show?
The evidence shows that, yes, a lot of clothes go into landfills and that’s harming the environment. The argument is that people don’t care as much about these clothes: You pay $20 for a dress. Why keep it? I’ll get a new one. That goes in the trash. Shein is seen as ultrafast fashion, even cheaper prices produced even more quickly, and so a lot of people are calling on them to do something different, to lay out a sustainability plan. Shein, through one of its designer programs, has said it’s starting to offer more sustainable products or materials and encouraging their designers to use them. But for critics, it really feels like a drop in the bucket.
Chinese companies have been under tremendous scrutiny in the U.S. How do you think Shein’s ties to China will figure into a potential IPO?
There’s a lot of questions around their business model. There’s a lot of questions about how much data consumers are giving to Shein and what kind of access the Chinese government has to that. While founded in China, Shein’s headquarters are currently in Singapore, so that’s one thing the company often calls out.
Despite all this criticism and the tricky IPO environment right now, Shein has continued to rise in popularity, especially with young shoppers. What does that tell you both about the future of Shein, but also the future of retail?
Shein is almost becoming the competitor to other retailers that Amazon is and was, in the way that Shein has introduced this new business model that is just so hard to compete with. Low prices, moving merchandise so quickly, using technology—all these things that the retail industry knows it needs to do to capture the next generation, Shein is already doing.
At the same time that Shein has gone gangbusters, there has been this push, especially in the fashion industry, around sustainability, slower fashion, and more transparent supply chains. If Shein pulls off a huge IPO, does that mean that all this talk of sustainability was just lip service?
I think what people say are their values sometimes doesn’t align with the actual cost of things. We live in an economy where cheaper usually drives our purchasing decisions. It’s such a tricky question because you see all the time that Gen Z cares the most about sustainability, but also Gen Z loves Shein, just like millennials love Forever 21. I think that’s the constant tension in consumerism.
Reference: https://slate.com/technology/2023/12/shein-ipo-future-of-retail-environment-labor.html
Ref: slate
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